Mark Cuban sold the Dallas Mavericks for $3.5 billion. Why did he do that?
This is something that is very interesting considering Cuban is one of the most public supporters of the league. He states how well the league is doing and has a very bright future. His team does play in a strong market (Dallas) while having one of the league's brightest young stars.
So why is Cuban exiting stage left?
Actually, he is staying on to run operations. The difference is he has a bunch of money in his pocket.
Cuban understands technology. This is something few can dispute. For this reason, he probably has insight into the media uncertainty for the league's future. The television contracts with ESPN and TNT are coming up.
Some might say that $3.5 billion is a lot of money. Obviously it is. However, this might be a situation where Cuban undersold.
At the end of 2022, the Phoenix Suns were sold for $4 billion. Here we see the Mavericks were valued for less even though they play in a bigger market. Also, it was a year later, with the inflation of sports franchises in effect.
So did Cuban take less money? That is impossible to say. If the value of his franchise is less than the Suns a year later, it shows how far things are falling.
Or perhaps Cuban knows something.
The ratings for the league are not strong. This is a problem considering it is about to enter into negotiations for a new contract. The advantage is that Apple and Amazon might be heavy bidders.
This year, they implemented an in-season tournament. Why would the league suddenly do something like this? It could be to try and massage ratings. Unfortunately, even with this, it was only a 4% increase over the regular season numbers from a year ago.
None of this bodes well for the upcoming contract.
With professional sports, the leagues are dependent upon the television money. Everything keeps escalating yet the starting point is the media. As long as multi-billion dollar money is tossed around, the leagues are fine.
Ratings through a wrench into the situation. This is a turn off to advertisers if they are falling. That means the networks have difficulty making their money back. If this is known, the bidding could fall off.
Is this what Cuban is projecting? Does he see the writing on the wall? He is still a relatively young guy so he is not estate planning, i.e. divesting himself of his assets. There is a huge difference between being in the early 60s as compared to entering one's 80s.
Some might say that he is still running the team, hence nothing really change.
Nonsense.
The ownership of a sports franchise is all about status and ego. Sure, there is enormous equity gains to be made. Heck, there is probably tremendous cash flow for some of them. That said, these people tend to not have an issue with either of that. An extra $1 billion in equity value is not going to affect Cuban whatsoever.
Do you know what does? Being the owner of the Dallas Mavericks. That is a status that not many have. Whatever the sport, it is a very small club. Many have the money to own a professional sports team yet few do. That is how small the circle is.
Cuban was in it and now he left. He did so for a price that appears to be below market value. Why did he do this?
My guess is he knows the league is struggling. It has better demographics in its fan base as compared to baseball yet is seeing the ratings suffer. At the same time, the local broadcast network for much of the league is in bankruptcy. Cuban might be reading the tea leaves and bailing while he can.
We will see how this turns out. Cuban is not a stupid man and, I believe, has the ego to want to be a NBA owner. That title is no longer available to him.
Why did he give it up?
